Karnataka High Court
Property And Finance Private Ltd. vs Union Of India (Uoi) on 5 December, 1990
Equivalent citations: ILR1991KAR315
ORDER Balakrishna, J.
1. An action for Judicial Review of an administrative order is brought before this Court by victims of Indo Pak Conflict of 1965. The seizure of the immovable property in Karachi of M/s. Palace Hotel (Karachi) Limited by the Government of Pakistan fetched an ex gratia payment of Rs. 3,15,463-82 from the Government of India whereas the market value of the property of the relevant time amounted to Rs. 2,60,21,208/- as claimed by the petitioners. The petitioners are seeking a declaration that they are entitled to a sum of Rs. 29,60,961-20 and for a direction to the respondent for payment of the aforesaid sum together with interest at the rate of 18% per annum or at the rate to be fixed by this Court.
2. The material facts culminating in this Writ Petition may be briefly set out as follows:-
Hostilities between India and Pakistan commenced in 1965 and ended with an agreement signed between the two countries which has come to be known as Tashkent Agreement dated 10-1-1966. The petitioners who were caught in the cross-fire of Indo Pakistan conflict were the owners of immovable property in Karachi, West Pakistan, where they had established a hotel business carried on by M/s. Palace Hotel (Karachi) Limited with the 1st petitioner as the Owner and the 2nd petitioner as its Director. It is claimed that it was the only hotel of International standard in Karachi at the relevant point of time. The Hotel was adjacent to the Government House in Karachi being located not only in a prestigious area enjoying a high market value, the land value being very high, in 1965 when war broke out between India and Pakistan, the Government of West Pakistan directed by an Ordinance that all properties of Indian nationals and companies in West Pakistan shall best in the Custodian of Enemy Property for Pakistan at Karachi and thus the Indian nationals and companies belonging to Indian nationals came to be divested of their property. Similar action was taken by the Government of India in exercise of power conferred on it under Sub-rule (1) of Rule 133(v) of the Defence of India Rules, 1962, that all immovable property in India belonging to or held by or managed on behalf of Pakistan nationals shall vest in the Custodian of Enemy Property for India with immediate effect. An identical order was issued by the Central Government in respect of movable assets also held by or managed on behalf of Pakistan nationals in India. After cessation of hostilities between the two Countries, the Government of India evolved a scheme to grant some adhoc relief by way of interim compensation to Indian nationals and Indian companies who had lost properties in West Pakistan. It is estimated that the value of the property taken over by the Government of India belonging to Pakistan nationals and companies in India including the value of assets, movable and immovable, as compared with what was taken over by the Pakistan Government was in the ratio of 1:4,
3. On 10.1.1966, both the countries entered into an Agreement at Tashkent U.S.S.R. One of the terms and conditions of the Agreement was that both the Countries should return and restore the property and assets seized by the respective Countries during the period of war between the two nations. It transpires that the Government of Pakistan did not implement the provision and violated the letter and spirit of Tashkent Agreement. Thus the Indian nationals and companies whose property had been seized by the Pakistan Government did not receive any benefit from the Tashkent Agreement. Neither the property was returned to them, nor compensation paid to them. Repeated representations were made to the Government of India by the expropriated Indians for compensation out of Pakistan assets vested in the Government of India. After considerable deliberation, the Government of India ultimately agreed in principle that the Indian nationals and companies who had been divested of their property in Pakistan should be afforded some interim relief. On 15-3-1971, by a Notification dated 15-3-1971 published in the Gazette of India Extra-ordinary dated 18-3-1971, the Government of India announced an adhoc interim relief in the form of ex gratia grant payable out of the Consolidated Fund of India at the rate of 25% of the value of the verified claims restricted to a maximum of Rs.25 lakhs in each case for all Indian nationals and Indian companies who had been deprived of their property in Pakistan against the execution of an indemnity bond by the recipients. In the said Notification, it was specifically made clear that if in any case the limit of payment exceeded Rs. 25 lakhs, the case shall be decided on merits, vide Annexure-A.
4. Subsequently, it is stated that the Government of India laid down comprehensive guidelines regarding grant of compensation over and above the ceiling of Rs. 25 lakhs. Such higher compensation was intended to be made available in the case of some companies whose registered offices are established in India but whose assets in Pakistan had been lost. It is claimed that the 1st petitioner is one such company and that it is entitled to compensation exceeding the ceiling of Rs. 25 lakhs, unaffected by the ceiling limit. It is stated that this vital aspect of the matter was brought to the notice of the respondent by the petitioners in their letter dated 14.1.1974 vide Annexure AA1.
5. In response to the Notification issued by the Custodian of Enemy Property for India at Bombay, the 1st petitioner preferred a claim before the said Authority at Bombay in the prescribed form. The Custodian of Enemy Property in India was an authority constituted by the Government of India to verify the value of the claims. The said Authority called for evidence from the 1st petitioner in regard to the value of the property lost and the 1st petitioner furnished the required evidence to substantiate its claim.
6. On 1.5.1973, a communication vide Annexure-B was received by the 1st petitioner from the Custodian of Enemy Property for India. The substance of the letter is that the Authority had decided to make an adhoc ex-gratia payment of Rs. 3,15,463-82 to the 1st petitioner. In the letter it was indicated that the 1st petitioner was required to duly execute the indemnity bond in the form enclosed to the letter and also to complete the bill appended to the letter in duplicate and forward it to the concerned authority. The Ist petitioner complied with the direction. According to the Indemnity Bond executed (Annexure-C), the Government of India agreed to pay an adhoc interim relief in the form of ex-gratia grant from the Consolidated fund of India with a view to give some relief to such Indian claimants against Pakistan. The Indemnity Bond also refers to the fact that the Custodian of Enemy Property for India, Bombay, after conducting a preliminary investigation had agreed to pay to the Ist petitioner an ex-gratia payment of Rs. 3,15,463-82 subject to the terms and conditions contained in the Indemnity bond.
7. It is stated that Ist petitioner accepted the adhoc ex-gratia payment of Rs. 3,15,463-82 without prejudice to its right.. Later on the 1st petitioner wrote to the Custodian of Enemy Property for India on 8.5.1973 (Annexure-E) and also to the Secretary, Ministry of Commerce, New Delhi, pointing out that payment of the said sum of money as against the petitioners' claim and entitlement for Rs. 2,60,21,208/- was unjust and requires re-determination. According to the petitioners, as a fall-out of the petitioners' letter of protect, an Interministerial Meeting was convened on 4.10.1913 by the Government of India wherein the claim of the Ist petitioner along others was discussed and a policy decision was taken at the said Meeting on 4.10.1973 resolving that evidence should be taken on the claims for land and buildings and that such evidence should be first obtained from the claimant by the Custodian of Enemy Property in the form of an affidavit in the manner prescribed. A Panel consisting of 3 officials was set up and it was required to record oral evidence of the claimants. One of the 3 officials was to be the Custodian of Enemy Property and he was to preside over the Panel. The other two officials were to be the nominees of the State Government concerned and a judgment was to be given by that Panel ultimately. It was also decided that once the Panel made its recommendation en the basis of affidavit and oral evidence, according to the petitioners, normally the Government would not question the Panel's judgment. It is stated that this system of arriving at the value of claims was modelled after the basis adopted for evacuee property during the partition of India.
8. It is asserted that in regard to specific cases of the nature of the Ist petitioner, finally a decision was taken by the Government of India at the time of constitution of the Panel that verification should be based on the value of all lands as obtaining in 1965 and not on the basis of book value. The petitioners thereafter pursued the matter with the Custodian of Enemy Property for India for further action in the matter by letter dated 23.4.1974 to which a reply was given on 23.5.1974 informing the petitioner that the case is being processed (Annexure E-1 series). In implementation of the decision taken at the Inter-ministerial Meeting dated 4.10.1973, the Ist petitioner was summoned by the Panel to substantiate the claim in the manner prescribed. It appears that a prolonged hearing was conducted by the Panel and both oral and documentary evidence came to be adduced before the Panel in the manner required. The notice of hearing served on the petitioner by the Panel is dated 6-7-1974 (Annexure-F). The petitioners learnt that on or before 22-7-1974, after a detailed consideration of the claims made by the Ist petitioner and in the light of the evidence placed on record, the Panel entered a verified claim in respect of the land and buildings of the petitioners and fixed the market value at Rs. 1,31,05,700/- and also directed that the sum of Rs. 3,15,463-82 already paid should be adjusted against the verified amount. Thus, according to the Panel, the compensation payable to the petitioners was in the order of Rs. 32,76,425/- which is 25% of the verified value of the claim of Rs. 1,31,05,700/-. Deducting the adhoc interim grant received earlier by the petitioners in a sum of Rs. 3,15,483-82, the petitioners expected payment of Rs. 29,60,961-20 being the balance amount. Since there was no official communication of the findings of the Panel and no communication from the concerned authority, the Ist petitioner wrote a letter on 11.9.1975 requesting for expeditious action in the matter (Annexure-G). In response to the letter, the Custodian for Enemy Property for India replied by letter dated 18.9.1975 informing the petitioner that the claim was under consideration and further communication would follow after a decision was taken in the matter (Annexure-H). The Ist petitioner wrote again on 23.9.1975 drawing attention to the proceedings before the Panel and requested for action based on Panel decision (Annexure-J). By letter dated 24.2.1976, the Ist petitioner was informed by the Custodian of Enemy Property for India that the earlier payment of Rs. 3,15,463-82 was an adhoc ex-gratia grant in respect of the properties lost by the petitioners in Pakistan. Again on 7.2.1978, the Ist petitioner addressed a letter to the respondent setting out its claim in detail stating that the claim of the Ist petitioner should be settled without any further delay particularly when similar claims of two other parties viz. Bristol Hotel (Karachi) and Hotel Oberoi of Karachi had been settled accepting the findings of the Panel (Annexure-L). Again on 23-3-1978, the respondent wrote to the Ist petitioner that the matter was under consideration and that the petitioner would be informed in due course (Annexure-M). Ultimately, about a year later, on 22.2.1979, the respondent addressed a letter to the Ist petitioner repudiating the claim of the Ist petitioner for payment of the amount demanded on the ground that for the purpose of payment of compensation the basis is the balance-sheet and not the market value (Annexure-N). Thereafter the petitioners made repeated bids to persuade the respondent to release payment on the basis of market value and not on the basis of balance-sheet in consonance with the policy decision of the Government of India laid down earlier and manifest from its conduct.
9. On 16.3.1979, the petitioners wrote to the respondent that out of 3 cases referred to the Panel compensation was paid on the basis of market value determined by the Panel, whereas in the case of the petitioners payment was disallowed on the basis of market value and that the petitioners are entitled to be paid on market value basis only (Annexure-O). On 28.3.1979, a reply was issued to the petitioners stating that there is no change in the position as communicated on 22.2.1979 (Annexure-P). Touched to the quick, the petitioners decided to persist in persuading the authorities to their point of view by addressing letters to various authorities on 16.7.1982, 9.3.1983, 16.8.1984 and 3.9.1984 optimistic of legitimate redress (Annexure-'Q' to 'T'). On 13.9.1984, the respondent gave a reply to the Ist petitioner with reference to the letter dated 16.8.1984 categorically stating that the Ist petitioner is entitled to 25% of the verified value of the claim only (Annexure-U). In regard to the letter of the petitioners dated 3.9.1984, the Director, Ministry of Commerce, Government of India, by reply dated 11.1.1985 reiterated that the claim had been rightly settled on the basis of balance sheet (Annexure-V). The Ist petitioner again persisted with another representation dated 21.2.1985 in reply to the letter dated 11.1.1985 pointing out the untenability of the stand taken by the respondent (Annexure-W). The Ist petitioner also wrote to Sri Arjun Singh, the erstwhile Minister of Finance and Commerce seeking payment of the dues to the Ist petitioner by letter dated 14.12.1985 (Annexure-X). At the same time, the Ist petitioner also wrote to the Chairman of the Estimates Committee who forwarded the same to the Ministry of Commerce. A copy of the letter addressed by the Chairman of the Estimates Committee to the erstwhile Minister of Finance and Commerce dated 25.12.1985 is Annexure-Y. The reply of the Minister to the Chairman dated 6.1.1986 is in the following words:
"I am having the matter examined!' But on 29.1.1986, the Minister replied that Rs. 3,15,463-82 had already been paid and that no further payment is contemplated in the matter (Annexure 'Z' and 'A1'). It appears that the point raised in the letter of the Minister dated 29.1.1986 was sought to be examined at some senior level by the Chairman of the Estimates Committee on behalf of the Ist petitioner, by letter dated 21.4.1986 (Annexure-A2). The Chairman of the Estimates Committee insisted on re-examination of the matter at a senior level by letter dated 1.12.1986 (Annexure -A3). Ultimately, in response to the said letter, the erstwhile Minister of State for Commerce replied on 12.1.1987 that the Ist petitioner under the scheme was entitled to receive only 25% of the verified value of the claim and that there is no scope for any further payment (Annexure-A4). Disillusioned by the reply received from the Minister of State for Commerce dated 12.1.1987, the petitioners have sought legal redress before this Court.
10. The point for consideration is whether the impugned order is vitiated by a breach of policy in the absence of countervailing public interest and whether the petitioners are entitled for grant of pecuniary relief by a legitimate expectation on the basis of market value instead of balance-sheet. The other point is whether the Writ Petition is liable to be dismissed on the grounds of laches.
11. It is contended on behalf of the petitioners that denial of relief notwithstanding the terms of the Resolution dated 15.3.1971 as amended is a deprivation of their right flowing from the existing policy of State at the relevant point of time when persons similarly situate were paid on the basis of market value and not on the basis of balance-sheet.
The other contention is that the impugned action of the respondent in refusing to make payment to the petitioners on the basis of findings of the Panel duly constituted in terms of Interministerial Meeting held on 4.10.1973 is violative of principle of promissory estoppel inasmuch as the Resolution dated 15.3.1971 (Annexure A) as modified operates as an estoppel against the State from acting in any manner contrary to it because the said Resolution holds out the promise to the petitioners that payment would be on the basis of market value.
Further contention is that there is discrimination against the petitioners in paying the amount based on market value to Bristol Hotel, Karachi and another and, at the same time, denying payment on market value basis to the petitioners when the same Panel had determined the market value of the property of all the three, thereby infringing Article 14 of the Constitution of India.
Lastly, it is contended that the Writ Petition is not barred by laches since the petitioners were making continuous efforts by making representations to various authorities in order to pursuade the respondent to grant relief to the petitioners on the basis of market value and that it was only when finality was reached on 12th January 1987 by an adverse reply from the erstwhile Minister of State for Commerce dated 12.1.1987 (Annexure-A4), that the petitioners promptly approached this Court by preferring the Writ Petition on 16.4.1987.
12. A detailed statement of objections is filed on behalf of the respondent. It is contended that the Award dated 22.7.1974 pursuant to the Meeting and decision dated 4.10.1973 cannot be made subject matter of a Writ Petition since they are under the policy laid down by the Government and the scheme thereunder in accordance with the Resolution dated 15.3.1971 only to make an adhoc interim-relief in the form of ex-gratia grant of 25% of the value of verified claims in respect of the property lost by the Indian nationals and Indian Companies during the Indo-Pak conflict and that the petitioners have no legal right to invoke Writ jurisdiction under the said policy/scheme.
It is contended that ex-gratia payment at 25% of the value claimed as per the scheme amounting to Rs. 3,15,463-82 was paid to the petitioners during June 1973 following the decision of the Government of India under the scheme and the decision of the Panel dated 4-10-1973 and the award dated 22-7-1974 made by the Panel is not binding on the Government of India because the Panel was constituted only for the purpose of valuing the property lost in the former East Pakistan. It is contended that the said award is based on a second verification made by the Panel on the basis of appreciated value of the land and building which was not admitted by the Ministry - the sanctioning authority
- and, therefore, the petitioners have no legal right for receiving payment in terms of the said recommendations.
According to the respondent, no part of the cause of action has arisen within the jurisdiction of this Court and, therefore, the matter cannot be adjudicated upon. The mere fact that the 1st petitioner Company changed its address from Flat No. 28, 26 Chowringee Road, Calcutta-13 to the present address, viz., No. 51, Defence Colony, Indiranagar, Bangalore-38, as its executive office address would not confer jurisdiction on this Court because the petitioners are already paid compensation in accordance with the scheme as early as 1973. It is submitted that merely because the petitioners continued to correspond from Bangalore address since 1978, cause of action would not arise within the jurisdiction of this Court.
Another contention is that the Indo-Pak conflict took place in 1965 and adhoc ex-gratia payment was made in the year 1973, but the Writ Petition is filed in 1987 and, therefore, the Writ Petition is barred by laches. Subsequent correspondence, according to the respondent, is not relevant in the circumstances of the case and that such correspondence would not extend the limitation.
The respondent has even objected to the calling for records on the ground that the proceedings are policy based on the assumption that the petitioners have no legal right. It is submitted that there is no adjudicating order to determine the legal right of the petitioners in the said proceedings. Though it is admitted that the Bristol Hotel, Karachi, the amount paid being Rs. 1,29,639/- which is 25% of the value of the property amounting to Rs. 5,18,558/- only as an ex-gratia grant in respect of their half share in Bristol Hotel property. The petitioners had leased their hotel and were receiving the rental from it and they were paid only 25% of the value of the property based on balance-sheet. Therefore, there is no discrimination between the two.
As could be seen from para-13 of the statement of objections, there is a reiteration that payment already made to the petitioners is in accordance with Resolution dated 15.3.1971 which provides for relief in the form of ex-gratia sum out of Consolidated Fund of India at the rate of 25% of value of verified claim. It is contended that the claim for relief in excess of what has been paid is not in accordance with the scheme and it has been totally rejected by the respondent. It is also contended that the verified value of the claim is used only as a measure to determine the ex-gratia grant and it is not an assurance that the entire verified value of the claim will be paid to the claimants and the claimants do not get any legal right to claim the full value of the verified claim on receiving the ex-gratia payment. It is urged that the scheme of ex-gratia payment is not meant for paying compensation with reference to the market value of the property lost and the context of revaluation of the claim by the Panel was with reference to the fact that Palace Hotel at Karachi had been converted into Inter-Continental Hotel by the Government of Pakistan and was situate near the Governor's residence at Karachi and the cost of the land on which the Hotel stood had appreciated enormously. It is submitted that the Panel has not given the final say in respect of the properties in West Pakistan. It is also stated that it was decided at the Governmental level that in each case the Panel report would be examined by the Ministry and only then finalised and the question of accepting the recommendations of the Panel automatically does not arise. Finally, it is contended that there is no discrimination practiced and that all claims have been verified in accordance with the scheme of the Government.
The learned Senior Standing Counsel for the Central Government appearing for the respondent submitted that a distinction has to be made between the claim of a Company and an individual owner in the matter of making ex-gratia payment and that an additional liability on the State to enrich an individual at the cost of the Consolidated Fund of India does not commend acceptance since the fund should be utilised for common good in preference to an individual as otherwise the basic aspirations of common man would be affected by a depletion of State's financial resources. Thus, it was sought to be made out that there is in existence countervailing interest of common good which would suffer if the Writ Petition is allowed particularly when financial resources of the State are scarce. The learned Counsel went to the extent of arguing the diversion of meagre financial resources affects human rights since the conservation and application of meagre financial resources are important and that there is no justification for issue of a Mandamus on the basis of either principles of promissory estoppel or on the principle of legitimate expectation.
13. An inter-ministerial Meeting was held on 4-10-1973 in the Ministry of Commerce, New Delhi, in respect of several issues which arose during the examination of claims preferred by Indian nationals in Pakistan for ex-gratia grant by the Indian Government. This Meeting was attended by the Secretary (Internal Trade), Ministry of Commerce; Additional Secretary and Financial Adviser, Department of Expenditure, Ministry of Finance; Joint Secretary, Ministry of External Affairs; Joint Secretary, Department of Company Affairs; Joint Secretary, Department of Rehabilitation; Joint Secretary, Ministry of Law; Joint Secretary, Department of Economic Affairs, Ministry of Finance; Under Secretary, Ministry of External Affairs; Under Secretary & A.F.A., Ministry of Finance; Custodian of Enemy Property, Bombay; Under Secretary, Ministry of Commerce and Director, Ministry of Commerce. Thus, the Meeting was attended by the representatives of all the concerned Departments and Ministers and in particular of the Finance Ministry.
14. Some of the excerpts of the Meeting are relevant and hence they are re-produced :-
"Initiating the discussion, the Chairman mentioned the plight in which the Indian nationals had to flee or were literally pushed out from both the East and West Wings of the then Pakistan during and after the 1965 Indo-Pakistan conflict. In most of the cases people were not able to bring any documentary evidence with them. The Government had decided to make ex-gratia payments in 1971, but due to lack of decisions on various points which had emerged during verification of claims, the pace of disbursement of ex-gratia grant had been very slow. He therefore, emphasised the need for taking a sympathetic and realistic view of the situation.
The Chairman, in particular, mentioned two cases of which he was personally aware of - one was about the Palace Hotel in Karachi and the other was about Oberoi Hotels in Rawalpindi, Murree, Peshawar and Lahore. The Palace Hotel which had been turned by the Government of Pakistan into an Inter-continental Hotel-was situated near the Governor's residence in Karachi. Naturally, the cost of the land on which the hotel stood had appreciated many times as has happened in any other big city in India. Likewise, the case of the Oberoi Hotels. Obviously such cases had to be viewed in the context of the ruling prices in 1965 and not on the basis of book values.
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4. Indian Companies in Pakistan : In view of an earlier Inter-ministerial meeting's decision, only balance sheet of partnership/propertory firms were accepted and any other documentary evidence was not being accepted. It was agreed that where no balance sheet could be made available by the claimants, indirect evidence in the form of income-tax return submitted by the claimants to the Pakistan authorities or a profit and loss account as may have been filed to a Pakistani authority, may also be accepted ....................................
5. Lands and Buildings : In accordance with an earlier Inter-ministerial meeting's decision, currently claims for land and buildings were not being entertained where no direct evidence in the form of title deeds etc., was available. It was suggested that following secondary/collateral evidence may be accepted.
i) "Parchas, Khatians"
ii) Certificates from local authorities in Pakistan such as Municipal Committees, Union Councils etc., and not necessarily Government of Pakistan.
iii) Income Tax assessment orders.
iv) Certificates from officials of Pakistan/Bangladesh Governments.
v) Where primary and secondary evidence are not available, oral evidence under the Evidence Act, 1872 from persons who claim to have knowledge of existence of properties claimed can be taken. Such evidence shall be first obtained from the claimants by the Custodian of Enemy Property in the form of affidavits from atleast two such persons sworn before an authority authorised under the law to give an oath affirming their personal knowledge of the claimant's ownership of the properties with full details. Following this, oral evidence will be taken by a Panel of three officials, one of whom will be the Custodian of Enemy Property and he will preside over the Panel and the other two officers will be nominated by the State Government concerned and a judgment given by the Panel. The State Government concerned will be requested to nominate one judicial officer and another Land Records Officer for this purpose. Once this Panel makes a recommendation on the basis of affidavits and oral evidence, normally Government will not question the Panel's judgment. This system of oral evidence has been designed on the same basis as has been done for evacuee property during partition.
The above suggestions were accepted.
With regard to the cases of the nature like Palace Hotel or Oberoi Hotels about which Chairman made a reference in His opening remarks, verification should be based on the value of all lands as obtaining in 1965, provided there was sufficient documentary evidence.
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15. It is therefore, seen that a Meeting of responsible and accredited representative officials of the Department of Ministry of Finance, Ministry of External Affairs, Department of Company Affairs, Department of Rehabilitation, Ministry of Law, Department of Economic Affairs etc., decisions were taken with reference to Palace Hotel in Karachi and Oberoi Hotels in Rawalpindi and other places that they have to be viewed in the context of the ruling prices in 1965 and not on the basis of book value. It is also stated that the Government of India had decided to make ex-gratia payments in 1971, but on account of lack of decisions on various points which had emerged during verifications of claims, the speed of disbursement of ex-gratia grant had been very slow and, therefore, the need for taking a sympathetic and realistic view of the situation was commended. Another important factor emerging from the said Meeting is that in the earlier inter-ministerial Meetings decisions had been taken that only balance sheets of partnerships or proprietory firms should be accepted and not on any other documentary evidence. This is clear from para 4 of the Meeting and the practice of relying on balance sheet was only in respect of partnership or proprietory firms and not on the balance sheet of companies incorporated in the Companies Act. The Palace Hotel, in the instant case, was run by a Company incorporated under the Companies Act. In regard to the valuation of lands and buildings with particular reference to Palace Hotel or Oberoi Hotel it was decided that verification should be based on the value of all lands as obtaining in 1965, provided there was sufficient documentary evidence. Oral evidence was admissible if primary and secondary evidence was not available. It was also made clear that a judgment shall be given by a Panel consisting of 3 officials presided over by the Custodian of Enemy Property and that once the Panel makes a recommendation on the basis of affidavits and oral evidence, normally the Government would not question the Panel's judgment. The reference of the case of Palace Hotel for determination of the value of the property and assets originated from the inter-ministerial Meetings of 4.10.1973.
16. The internal records and the exchange of correspondence made interdepartmentally reveals that the Finance Department was not in agreement with the determination of property value other than by reference to the Balance Sheet. It is the opinion of the Finance Department which ultimately prevailed and thereby the decision taken at the inter-ministerial Meeting came to be upset and similarly the finding given by the Panel. What was decided by the Panel was in effect rejected on account of the objection raised by the Finance Department. This is rather strange because the Inter-ministerial Meeting which took place on 4.10.1973 was a, Meeting in which the Additional Secretary and Financial Adviser, Department of Expenditure Ministry of Finance; the Joint Secretary, Department of Economic Affairs, Ministry of Finance; the Director, Department of Banking, Ministry of Finance and the Under Secretary, Ministry of Finance, participated in the Meeting and it can be said that the Finance Department was a Party to the decision taken at the said Meeting in which a Resolution was passed that the cases of the nature like the Palace Hotel or Oberoi Hotel in regard to the valuation of all the lands should be based on the land value as obtaining in 1965 and to refer the question to the Panel for its determination.
17. 'Balance Sheet' may be defined as a formal agreement of facts and figures in an intelligible manner, showing the total values of assets owned and the total amount of liabilities owned by a business on a particular date or at the end of a particular period, so that the net worth of the business may be ascertained. It is also known as a statement of assets and liabilities and net worth and in some countries described as 'Statement of Financial Position', that is a statement of the position of the business in terms of the formula: Assets, Liabilities plus Paid-up Capital and Surplus, as of a particular time, usually the end of an accounting period. It is a look, so to speak," between ,two successive income statements. It is of great interest not only to the Board of Directors and Share Holders but also to the suppliers of credit to the company such as Banks and other creditors and suppliers of goods as well as intending investors.
The following statement of the function of a balance sheet given in the evidence of the Institute of Chartered Accountants before the Cohen Committee was approved and adopted as corrected by that Committee:-
"The function of a balance-sheet may be stated to be an endeavour to show the share capital, reserves (distinguishing those which are available for a distribution as dividends from those not regarded as so available) and liabilities of the Company at the date as at which it is prepared and the manner in which the total moneys representing them are distributed over the several types of assets. A balance-sheet is thus a historical document and does not, as a general rule, purport to show the net worth of an undertaking at any particular date, of the present realisable value of such items as good-will, land, plant and machinery, nor, except in cases where the realisable value is less than cost, does it normally show the realisable values of stock in trade". (Extract from the evidence of the Institute of Chartered Accountants, in Cohen Committee Report, Para 98).
Therefore, it follows that strictly speaking, it cannot be said that the balance-sheet shows the true financial position, unless the assets and stock or revalued as on the date of the balance-sheet. As pointed out by the Cohen Committee, "if a balance-sheet were to attempt to show the net worth of the undertaking, the fixed assets would require to be re-valued at frequent intervals and the information thus given would be deceptive since the value of such assets while the company is a going concern, will in most cases have no relation to their value if the undertaking fails (page 55 of Cohen Committee Report).
18. The stand of the petitioners reflected in the representation made on 19.4.1973 by fetter addressed to the Secretary, Ministry of Foreign Trade, Government of India, New Delhi, is of relevance and the relevant portion of the same is extracted below:-
"All this was explained to the Custodian of Enemy Property, Bombay and we hereby again confirm that Property and Finance Ltd., was not trading or carrying on any other business in Karachi except being owners of the property for which compensation is claimed. In any event: the compensation due to us if based on the balance-sheet of the Property and Finance Pr. Ltd., will not show the investments made as the value of the property in the balance-sheet submitted by us reflects the purchase price in the year 1943 when there were hardly 50 letting rooms. After the purchase of the said property, lot of improvements, new constructions, additions, renovations, air-conditioning etc., were carried out at enormous expense which is not shown in our Calcutta Office balance sheet on the file. In the year 1964-65 there were over 137 letting bed rooms in Palace Hotel, Karachi against 50 rooms in 1943. This additional expenditure incurred during 1965 and in the year immediately preceding would be reflected in the balance-sheet of Karachi Branch of Property & Finance Karachi Ltd., Karachi, which is not available with us. This is supported by letter No. 3(85)-CL.VI/66, dated 9th December 1966 and other bearing No. 3(85)-CL.VI/66 dated 9th December 1965 issued by the Under Secretary to the Company Law Board, Department of Company Affairs, New Delhi - copies attached hereto, marked Annexure 'A' and 'B'."
19. Thus, it stands to reason that the real value of the property cannot be gauged from Balance Sheet which is sought to be relied upon by the respondent for the purpose of payment of pecuniary relief to the petitioners. All these aspects were taken into consideration and that the principle that property value in 1965 should be taken into account after it was determined by the Panel, in substance, is the resolution passed at the Inter-ministerial Meeting.
20. In the above circumstances, it is difficult to reconcile how the respondents are justified in going behind the decision taken at the Inter-ministerial Meeting and the determination of property value made by the Panel in consonance with the resolution of the Inter-ministerial Meeting.
21. It may be necessary to recall the situation in which the question arose. At the relevant and material time, India and Pakistan were embroiled in international conflict familiarly known as Indo-Pakistan war. Indian citizens held assets in Pakistan and Pakistan citizens also had assets in India. In a war which was not the making of either the citizens of rival sovereign states or the petitioners, the properties belonging to the citizens of the warring Nations came to be confiscated by the respective Governments. The situation was undoubtedly a sequel of Act of State of both the Countries.
22. The attitude expected of a Welfare State in particular when its citizen is deprived of his property by virtue of the citizen being reduced to the status of an alien enemy for reasons not within his control is one of equity and good conscience. If the plight of the citizen is the creation of the State however unintended it may be, when the immediate and proximate cause is the war syndrome, should the helpless citizen go without adequate material reparations? Should the relief which such a citizen should receive at the hands of the State be consistent with the principles of proportionality or should it be merely a symbolic indulgence shown by the State to the victim. Should the State remain immune to its obligation by resting on the oar that the policy adopted by it does not admit adequate material relief which the market value of the property and assets warrant? What should be the just and fair choice? Is it the predicament of the victim or an Inconsiderate policy of the State if the test of value based Judgment is to be applied? Could the State apply different yardsticks to similarly placed persons and discriminate between an individual and a corporate body in the matter of application of the basis for arriving at the real value of the property? In the instant case, the State extended what is described by it as ex-gratia adhoc payment in the beginning, full payment at another point of time and using the expression 'compensation', in the bond executed by the petitioners and again insisting that what is payable is only ex-gratia payment.
23. It appears to me that synonymous with the residuary executive power of the State, it would not be inappropriate to apply the principle of residuary duty of the State towards a citizen in distress in an exceptional or extraordinary situation for the creation of which the State was directly instrumental. The State should not be found wanting under the guise of policy pretext and technicality ploys inconsistent with the concept of a Welfare State when it is summoned to discharge its residuary responsibility in an extraordinary situation to an uprooted citizen. When deprivation of the kind is directly attributable to international conflict in which the State is involved, it would not be either unreasonable or irrational to compensate the victim fairly and reasonably. It appears to me that the principle involved is one of loss distribution which is the shifting of the loss from the sufferer to the State in an extraordinary situation. The moral compulsion is the responsibility of the State arising from exposure of its own citizen in enemy territory to a foreseeable hazard which the victim could not possibly avert. I am of the opinion that the extent of absorption of the loss by the State in compensating the victim ought to be commensurate with the deprivation suffered. The fact that the loss sustained by the State in compensating the victim is minimised to the extent of confiscation of enemy assets within Indian territory cannot be lost sight of. If the Court cannot test the wisdom of the policy, it can atleast look into the policy making process and test it in the scale of human values with the interests of the victim weighed against the countervailing public interest, if any. Further, there is no justification for denying to the petitioners pecuniary relief based on the value of the property at the relevant point of time as determined by the Panel when the decision of the Panel in similar situations to a few others has been accepted. To discriminate a Company as against an individual when both are juristic persons deserving similar treatment when they are sailing in the same boat is less than rational, is a violation of Article 14 of the Constitution which is applicable to 'persons'.
24. Though it is contended on behalf of the respondent that about 709 persons (corporate bodies) are supposed to have been awarded relief not on the basis of market value, but on the basis of balance-sheet, not even a single specific instance is placed before the Court. Contemporaneously two other Hotels which are owned by individual proprietors (Bristol and Oberoi Hotels) have been afforded relief based on market value only. It appears these, two cases were also referred to the Panel and the finding of the Panel on market value was accepted and acted upon by the Government.
25. In the above circumstances, all reasonable indications were that the petitioners would also be granted similar relief. When an inter-ministerial Meeting was held and a Resolution was passed for referring the case of the petitioners to a Panel for determination of the market value of the property it cannot be said that it was a meaningless exercise resorted to by the Government of India. The Scheme of Payment did not spell out that only Companies will be ineligible for payment of market value. The only restriction that was placed was that in any event, nothing more than 25% of the total value of the property could be paid. However, the determination made by the Panel was thrown to the winds and the Government back-pedalled and refused further payment to the petitioners by turning 'volte face' and declaring that adhoc payment was itself conclusive and final. The resolution of Inter-ministerial Meeting and subsequent reference to the Panel aroused a legitimate expectation in the petitioners that payment on the basis of market value would be forthcoming. When the final intimation came, the petitioners were disillusioned particularly because the petitioners had left no stone unturned to secure relief by making representations to all authorities and persons whom the petitioners considered relevant, with great expectations. The petitioners were engaged in a correspondence which was spread over a considerable period of time. For the first time in 1979, the petitioners received the shock of repudiation. But till 1982 since the petitioners did not receive any communication supported by reasons for rejecting their request and since the petitioners could not have access to the report of the Panel, circumstances made the petitioners wait before deciding upon Court action. In these circumstances, it would be unfair to throw out the writ Petition on ground of laches. The petitioners are no better than hapless victims caught in the cross-fire of two warring nations and they deserve no less sympathy than a citizen who is divested of his property without reasonable compensation.
26, A welfare State would not be the poorer if adequate monetary relief is paid based on the market value of the property lost in enemy territory. The artificial distinction that Palace Hotel is owned by a Company and not by an individual does not stand the test of reasonableness. Whether it is an individual or a company, we are concerned with the case of a juristic entity and a juristic entity is as much entitled to relief as an individual citizen, I have already pointed out that payment of relief or compensation merely on the basis of balance-sheet to Palace Hotel is not a valid basis and this position was accepted by the Central Government at the Inter-ministerial Meeting and it is only thereafter the case of petitioners was referred to the Panel for determination of the market value of the property. I have also pointed out that a Balance Sheet cannot be a true reflection of the value of property. It has to be held that the policy decision taken by the Central Government in referring the case of petitioners to the Panel for determination of market value of the property was actuated by the object of granting relief to the petitioners based on market value and not on the balance-sheet.
27. I am of the opinion that in the facts and circumstances of the case that the petitioners are entitled to the monetary relief to the extent of 25% of the market value of the property of the petitioners as determined by the Panel and that the Central Government was not justified in denying the same to the petitioners. The burden on the State exchequer is infinitesimal and State aid in the circumstances of the case would not be unreasonable or unjustified. No act of fairness can ever be unjustified particularly when it is supported by not only a legitimate expectation of the victim, but also by moral and equitable considerations. Coming to the aid of a deprived citizen in a predicament which is not his own creation, cannot be described as arbitrary or unethical. By referring the matter to the Panel, it is implied that the State wanted to apply the principle of proportionality in the matter of grant of relief to the petitioners and it is too late in the day to go behind its solemn commitment. The commitment arises out of a policy decision and the change of the policy, if any, after reference to the Panel without an opportunity of consideration to the petitioners is unjustified. It may also be said that there is no scope for policy eccentricity or wayward philanthropy in granting relief to one and denying to another by applying different yardsticks to similarly situate persons. I do not think that in the circumstances of the case that there is any countervailing public interest which impedes grant of relief to the petitioners on the basis on which relief was accorded to Bristol and Oberoi Hotels.
28 Principle of legitimate expectation has come to be recorded as a valid ground for Judicial Review of administrative action. The focus is on the conduct of the decision maker. The expectation is the one created by the conduct of the Decision Making Authority the non-fulfilment of which engenders judicial intervention. In some cases, legitimate expectation is an expectation and not a mere pious hope that a substantial benefit, privilege or other advantage will be either conferred or continued. In other cases, it will be the mere limited expectation that no adverse decision affecting an individual will be taken without first affording the person likely to be affected an opportunity to make a representation about it. The expectation may arise either by an express promise or by implication from past practice or existing practice or conduct.
29. In R v. Secretary of State For Human Department, 1985(1) All E.R. 40 it was held:-
"Where a member of the public affected by a decision of a public authority, had a legitimate expectation based on a statement or undertaking by the authority that it would apply certain criteria or follow certain procedures in making its decision, the authority was under a duty to follow these criteria or procedures in reaching its decision, provided that the statement or undertaking in question did not conflict with the authority's statutory duty ............ In the circumstances, the Secretary had acted unfairly and unreasonably in deciding the applicant's application ....................."
In O'Reilly v. Mackman, 1982(3) All E.R. 1124 Lord Diplock observed:
"But even where a person claiming some benefit or privilege has no legal right to it as a matter of private law, he may have a legitimate expectation of receiving the benefit or privilege, and if so, the Courts will protect his expectation by judicial review as a matter of public law".
IN Council of Civil Service Unions and Ors. v. Minister For The Civil Service, 1984(3) All E.R. 935 @ 944 it was held:-
"... Legitimate, or reasonable expectation may arise either from an express promise given on behalf of a public authority or free from the existence of a regular practice which the claimant can reasonably expect to continue..."
The criterion in the instant case is whether the decision on which the instruction was based was reached by a process which was fair to the petitioners.
In Chief Constable of The North Wales Police v. Evans, 1982(3) All E.R. 141 @ 155 commenting on Judicial Review, Lord Brightman said "Judicial Review, as the words imply, is not an appeal from a decision, but a review of the manner in which the decision was made."
The origin of the principle of legitimate expectation could be traced to the innovative Lord Denning, M.R. in Schmidt and Another v. Secretary of State, 1969(1) All E.R. 904 @ 909 For Home Affairs, when he used the phrase of 'reasonable expectation". Its judicial evaluation made further progress in HONG KONG'S CASE contributed by Lord Frazer. 'Reasonable expectation' used by Lord Denning was transformed into 'legitimate expectation' by Lord Fraser breaking a new ground and paving the way for Judicial Review. The principle is firmly entrenched in English Administrative Law and it is identified as closely allied to the 'right to be heard'.
The expectation takes several forms. One may be an expectation of prior consultation. Another may be an expectation of being allowed time to make representations especially where the aggrieved is seeking to persuade an authority not to depart from a lawfully established policy adopted in connection with the exercise of a particular power because of some suggested exceptional reasons justifying such a departure.
The orthodox view which was prevailing at one time that the remedy for abuse of policy of the State lay in the political field and not in the judicial realm is not rigidly in vogue with the changing trends which are manifest in modern Administrative Law. The upsurge of judicial activism has rendered the age old concept elastic if when a Court is confronted with the exercise of a discretionary power, inquiry is not altogether excluded.
In a well known letter addressed to Dicey, the great historian Maitland said :-
"The only direct utility of legal history (I say nothing of its thrilling interest) lies in the lesson that each generation has an enormous power of shaping its own Law".
(Cosgrove - The Rule of Law ; Albert Venn Dicey: Victorian Jurist 1980 P. 177).
It is a well recognised position that where there is a residue of miscellaneous fields of law in which the executive Government retains decision making powers which are not dependent on any statutory authority but nevertheless have consequences on the private rights of legitimate expectations of other persons which would render the decision subject to. Judicial Review if the power of the decision maker to make them were statutory in origin. Such a decision, in my opinion, is not immune to the test of legality, rationality and procedural propriety.
In Council of Civil Service Unions and others v. Minister for the Civil Service, it was held:-
"An aggrieved person was entitled to invoke judicial review if he showed that a decision of a public authority affected him by depriving him of some benefit or advantage which in the past he had been permitted to enjoy and which he could legitimately expect to be permitted to continue to enjoy either until he was given reasons for its withdrawal and the opportunity to comment on those reasons or because he had received an assurance that it would not be withdrawn before he had been given the opportunity of making representations against the withdrawal. The applicant's legitimate expectation arising from the existence of a regular practice of consultation which the appellants could reasonably expect to continue gave rise to an implied limitation on the minister's exercise of the power contained in Article 4 of the 1982 order, namely an obligation to act fairly by consulting the GCHQ staff before withdrawing the benefit of trade union membership. The minister's failure to consult prima facie entitled the appelants to judicial review of the minister's instruction [A.G. of Hong Kong v. Ng. Yuen Shiu, 1983(2) All E.R. 346 @ 350-351: 1983(2) AC 629 (1983) 2 ALL ER 346 considered]".
In Kio v. West, (1986) 60 ALJR 113 @ 142 it was held:-
"Circumstances are identified which give raise to a legitimate expectation as either an express promise given on behalf of the State or the public authority of the existence of a regular practice which the claimant can reasonably expect to continue. Whenever the doctrine of legitimate expectation is pressed into service it is in effect used for invoking principles of natural justice".
The focus on the nature of interest is evident in Durayappah v. Fernando, 1967(2) AC 337 The Privy Council laid down that in determining whether or not the principle of natural justice would apply to the protection of individual's interest, factors to be reckoned are (i) the nature of the complainant's interest ; (ii) the circumstances in which it would be interfered with; and (iii) the sanction which might be imposed on the decision maker.
What is relevant is the nature of the interest and not the enjoyment permitted by the decision maker which warrants judicial protection.
In Hong Kong case, it was only the legitimate expectation arising from the assurance given by the Government that enabled the Court to intervene on behalf of the illegal immigrant; his status as an illegal immigrant would not of itself have created any entitlement to a hearing (Attorney-General v. No Yuen Shiu)
30. in Annexure-C which is the Indemnity Bond executed by the petitioners at the time of receiving the adhoc ex-gratia grant from the Government, it is mentioned that the Custodian of Enemy Property for India, Bombay, after a preliminary verification has agreed to pay to the petitioners an ex-gratia payment of Rs. 3,15,463-82 subject to the terms and conditions contained in the bond. This paragraph in the Indemnity bond justifies the inference that balance-sheet was only used for the purpose of preliminary verification for making adhoc ex-gratia grant to the petitioners and that the balance-sheet cannot be regarded as the final say in the matter. According to Condition No. of the Indemnity Bond vide Annexure-C:-
"If and when any settlement is reached between the Government of India and the Government of Pakistan in respect of the assets and properties and/or business belonging to the nationals of either country seized or taken over by the respective Government under its own 'enemy property' regulations during and after the 1965 Indo-Pakistan Conflict, the amount of the adhoc interim relief hereby agreed to be paid to the Obligor shall be adjusted".
31. It is possible to reasonably infer from this Condition that what was given to the petitioners under the bond was only an adhoc interim relief in the form of ex-gratia grant and it was not the final sum of money intended to be granted to the petitioners.
32. According to Condition No. 3 :
"The Obligor hereby undertakes not to directly or indirectly negotiate either with the Government of Pakistan or with Government of Bangla Desh for the restoration and/or payment of compensation for the properties which were seized at the time of the Indo-Pak Conflict 1965 or subsequently."
Under Condition No. 3 the petitioners were precluded from negotiating whether directly or indirectly with the Government of Pakistan for either restoration of the property or for payment of compensation for the property which was confiscated by the Pakistan Government at the time of Indo-Pakistan Conflict 1965. The Condition further prohibited the petitioners against such a negotiation even subsequently also. In these circumstances, the right of the petitioners to claim compensation from the Pakistan Government or for restoration of the property was taken away and I do not think it would be fair to restrict the petitioners only to the grant of interim relief by way of adhoc ex-gratia grant of Rs. 3,15,463-82.
33. In the Resolution dated 15.3.1971 vide Annexure-A, it is stated :
"The question of giving some relief to the Indian nationals, companies etc., whose assets in Pakistan were seized by the Government of Pakistan during and after the Indo-Pakistan conflict of September 1965 and who have notified their losses to and filed claims with the Custodian of Enemy Property for India has been engaging the attention to the Government of India for some time. The Government of India have now decided that an adhoc interim relief in the form of ex-gratia grants from the Consolidated Fund of India at the rate of 25% of the value of the verified claims restricted to a maximum of Rs. 25 lakhs in each case may be made to all Indian nationals and Indian Companies against a bond to be executed by the recipients...."
It is clear from this part of the Resolution that the ex-gratia grant was only on an adhoc basis and it was based on the value of the verified claims with the ceiling limit of Rs. 25 lakhs. It is nowhere stated in the Resolution that in respect of nationals, companies etc., whose assets in Pakistan were seized by the Government of Pakistan during Indo-Pakistan conflict of September 1965, that adhoc payment will be made on the basis of balance-sheet in respect of companies and not on the basis of market value in respect of individuals or individual nationals and it is conclusive. It is, therefore, not permissible for the respondents to contend that what was intended by the Resolution was payment of only an adhoc ex-gratia grant and nothing beyond and that even such payment will be based only on balance-sheet and not on market value. If that was the intention of the Government, it should find a place in the Resolution. Nowhere in the Resolution is to be found such an indication. Therefore, I am of the opinion that there is no basis to believe that adhoc ex-gratia grant was the final amount to be paid to the petitioners and that the basis of market value is impermissible for grant of final relief to the petitioners subject to the limit of 25% of the market value of the property. Market value is exactly what was intended and decided at the Inter-ministerial Meeting which was acted upon by reference to the Panel. I am also of the opinion that by grant of relief to the petitioners on the basis of market value, neither public good, nor public interest, would be affected. On the other hand, it would be reasonable to presume that by giving such a relief to the petitioners, the Government would be not only fulfilling its commitment to the petitioners, but also answering the principle of accountability and social responsibility.
34. For the reasons stated above, the Writ Petition is allowed. The respondent is directed to pay to the petitioners a sum of Rs. 29,60,961.20 being the balance amount. There is no valid ground made out for grant of interest and hence no interest is payable to the petitioners. It is further directed that the respondent shall pay the said sum of money to the petitioners within a period of three months from the date of receipt of a copy of this Order.